AP-Dow Jones: Burma Economy

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Burma Economy Another Battleground For Govt, Opposition
 
     By Robert Horn 
 
   RANGOON (AP-Dow Jones)--Aung San Suu Kyi has a message for foreign =
investors
listening to the sales pitch of Burma's military dictatorship and sizing =
up the
country's profit potential: You're being tricked. 
   'Anybody who really knows what's going on with the Burmese economy =
wouldn't
want to invest here,' said Suu Kyi, leader of Burma's democracy movement =
and
winner of the Nobel Peace Prize. 
   The economy has emerged as a battleground between Suu Kyi and the ruli=
ng
junta, which claims that growth would be jeopardized by 'anarchy' if demo=
cracy
comes to the country, ruled by the military since 1962. 
   The State Law and Order Restoration Council, or SLORC, needs investmen=
t to
stay afloat and convince Burmese their lives are improving. Suu Kyi wants
investors to stay out - for now - and not finance the regime. 
   The SLORC says the economy grew 6.8% in 1995. Approved foreign investm=
ent has
reached $3.3 billion since 1988 - the year troops slaughtered hundreds =
of
pro-democracy activists in the streets - though only about $1 billion =
has
actually flowed in. 
   Suu Kyi contends that the economy, opened slightly by the current
dictatorship after 26 years of socialist isolation imposed by the previou=
s one,
has already peaked and is slowing down. 
   A walk around the capital provides a different picture at first glance=
 . 
   Shiny Japanese cars jam Rangoon's once-deserted streets. New high-rise=
 hotels
pierce the pagoda-studded skyline. Imported goods, from electronics equip=
ment
to designer clothes and perfumes, flood dingy shophouses and dusty market=
s. 
   'People in Burma are happy now,' said Htein Shwe, a technical school =
student.
'They have money.' 
   But a visit to the countryside or closer look at Rangoon reveals that =
most of
Burma's 45 million potential consumers remain desperately poor. Few peopl=
e
outside cities have plumbing or electricity. In Rangoon, most people stil=
l live
in run-down apartments above decades-old shops. 
   Investors argue that foreign money will raise living standards. Suu =
Kyi
claims little trickles down from the already wealthy elite. 
   World Bank and International Monetary Fund reports show Burma is mired=
 in an
economic mess. 
   Burma wants World Bank and IMF loans to build infrastructure needed =
to
industrialize. The institutions demand that the country first devalue =
its
currency, the kyat, which fetches six for one U.S. dollar at the official=
 rate,
but trades for more than 130 on the black market. The government says =
it needs
more time. 
   The balance sheets submitted to win the loans indicate two other probl=
ems:
Because the black market is so large, official figures don't measure at =
least
half the economy, and the numbers that do appear don't add up and are
incomplete. 
   What's missing is massive military spending. The generals admit 46% =
of the
budget goes to defense. But military imports don't figure into the ledger=
s,
prompting the IMF to warn there are large, unaccounted for expenditures =
it
cannot trace. 
   In addition, some economists speculate Burma's budget deficit is not =
the
stated 6.3% of gross domestic product (GDP), but anywhere from two to =
four
times that proportion. 
   With deficits fueling 35% inflation and interest rates hovering at =
18%,
domestic savings are low. And according to Burma's own numbers, actual =
direct
foreign investment is falling. 
   Still, photos in state-run newspapers show a seemingly endless stream =
of
foreign executives meeting with the generals to cut deals. 
   Critics say some economic growth in Burma - the world's largest heroin
producer - is financed by drug money. The U.S. State Department says the
government is cozy with major drug dealers. 
   And unlike in prosperous nearby countries like Thailand and Malaysia, =
the
cars and electronics goods on Burma's streets are not made domestically.
Manufacturing in Burma accounts for less than 7% of GDP. 
   Agricultural industries like fisheries and timber hold the best invest=
ment
promise for Burma, said Rajan Pillai, who heads up Peregrine Capital Myan=
mar. 
   'The prospects for growth are great, as much as 20 to 25 percent a =
year,'
Pillai says. 
   But he added that investors need to accept that they won't be able =
to pull
their money out for at least five years, when he believes a stock market =
will
have been established and the world financial institutions will have open=
ed
their lending windows. 
   (END) AP-DOW JONES NEWS 05-06-96
   0642GMT